Panama Economy Facts
The service sector dominates Panama’s economy, which for a number of years has been one of the fastest growing in the world. The income comes mainly from the canal, the free trade zone in Colón, the ship register and the international banking operations. Tourism is also becoming increasingly important.
The channel has been in full control of Panama since 2000. It generates a significant portion of the country’s GDP through mainly passage fees, transit services and sales of electricity and water. Every day, some 40 ships pass through the canal. More than half of the cargo comes from or is heading to the United States. One-twentieth of the world’s cargo traffic crosses the canal, by weight. The channel’s capacity has expanded over the years, but more and more ocean-going vessels gradually became too big for the locks. Therefore, a third set of locks was built which was completed in 2016 and doubled the capacity. The expansion took nearly ten years, cost at least $ 5.5 billion, and was the most comprehensive since the channel was inaugurated.
- Countryaah.com: Major imports by Panama, covering a full list of top products imported by the country and trade value for each product category.
New investments in the canal zone contributed to high growth, as did other infrastructure projects. Growth reached double-digit figures before and even after the dip in connection with the global financial crisis in 2009. After that, growth has slowed down, but still remained at between 5 and 5.5 percent between 2014 and 2017. A slight slowdown has followed.
Other major infrastructure investments are Central America’s first metro, in Panama City. The first line was opened in 2014 and the expansion continues. Plans are also under way for a fourth bridge over the Panama Canal and an extensive renovation of the city of Colón.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including PAN which represents the country of Panama. Check findjobdescriptions to learn more about Panama.
The free trade zone in Colón is the second largest in the world, after Hong Kong. In the zone, there are about 2,500 almost completely tax-exempt companies, mainly foreign, who further export goods to other parts of the world.
Large income differences
GDP per person is among the highest in Latin America. The figure increased two and a half times in a decade until 2016. But the income differences remain large. The government has been criticized for relatively little of the increased revenue going to education and basic community services. The trade and services sector creates quite a few jobs; many Panamans work in industry and agriculture where productivity is lower and incomes are low. There is concern that unemployment will increase when the major infrastructure projects are complete, only the expansion of the channel employed around 30,000 people. However, no major increase in unemployment was noted in the years following the completion of the channel construction.
Panama has long wrestled with the image of the country as a tax haven where not least money from drug trafficking is “washed clean”. Banking legislation has been tightened, and in 2001 the economic cooperation organization OECD removed Panama from its “black list” of countries that were not considered to be cooperative in the fight against money laundering. But the country was still accused of enabling both tax evasion and money laundering. In 2009, Panama was put on a new “gray list” of countries that promised to ease their banking secrecy to contribute to the international fight against tax refugees, but who have not acted since. Since an information exchange agreement has been concluded with other countries, Panama was removed from that list in 2011. With Sweden, Panama has such an agreement since 1 January 2014.
But when the EU published its first black list in 2017, Panama was included. Shortly thereafter, Panama was moved to a gray list of 55 countries that promised to comply with EU standards in tax and financial legislation, but without specific commitments. Two more years later, in February 2020, Panama was moved back to the blacklist. According to the EU, Panama has not done enough to tighten legislation after the scandal with the Panama Papers. Panama is now one of twelve countries and territories blacklisted by the EU.
The Panama documents refer to a total of 11.5 million documents that were leaked in 2016 from the law firm Mossack Fonseca, which had its headquarters in Panama and specialized in financial offshore operations. Panama was thus at the center of a disclosure of widespread tax fraud and fraud by a wide range of individuals, companies and banks worldwide (see also Current Policy).
Panama is one of the few countries in the world that does not print its own banknotes. The country’s currency, the balboa, exists as coins, but the banknotes used are US dollars. The Balboan is locked to the dollar at a fixed exchange rate, which limits Panama’s monetary policy room to maneuver as the country cannot write up or down the value of the currency.
FACTS – FINANCE
GDP per person
US $ 15,575 (2018)
US $ 65,055 million (2018)
3.7 percent (2018)
Agriculture’s share of GDP
2.2 percent (2018)
Manufacturing industry’s share of GDP
5.8 percent (2018)
The service sector’s share of GDP
65.1 percent (2018)
0.0 percent (2019)
Government debt’s share of GDP
39.5 percent (2018)
US $ 14,753 million (2018)
US $ 23,963 M (2018)
– US $ 5,067 million (2018)
Commodity trade’s share of GDP
53 percent (2018)
Main export goods
bananas, gold, pineapple, scrap, melons, sugar
Largest trading partner
USA, Costa Rica, China, Canada, Netherlands, Germany, Mexico